US envoy plays down chance of yuan accord

PUBLISHED : Sunday, 20 May, 2007, 12:00am
UPDATED : Sunday, 20 May, 2007, 12:00am

High-level talks aimed at long term gains

A senior US envoy for China has lowered expectations of 'deliverables' from the upcoming economic summit between Washington and Beijing and urges critics to focus on the long-term developments rather than the short-term gains.

'It is very important to recognise that the Strategic Economic Dialogue is not a specific event but a management tool to keep our economic relationship on an even keel during times of tension,' said Alan Holmer, the US Treasury's special envoy on China.

Mr Holmer made his comments on Friday on the eve of the Strategic Economic Dialogue meetings to be held in Washington on Tuesday and Wednesday.

Vice-Premier Wu Yi will lead a high-powered team of Chinese officials representing 21 ministries to meet their American counterparts, headed by US Treasury Secretary Henry Paulson. The delegation is also expected to meet US President George W. Bush, as well as American lawmakers.

The summit, which is the follow up of a December meeting held in Beijing, comes amid growing economic tensions between China and the United States. The US government reported that its trade deficit with China reached a record high of US$232.5 billion last year. As a result, the Bush administration is facing mounting political pressure from the Democrat-controlled Congress to take action against Beijing.

On Thursday, a bipartisan group of 42 Congress members filed a petition asking the administration to bring a trade case against China on the grounds the country is unfairly keeping its currency low to gain trade advantages.

In addition, two US senators on the Senate Banking Committee have urged the US Treasury Department to cite China for currency manipulation in its next foreign exchange report to Congress.

While saying such actions reflect the concerns of the American people, Mr Holmer said the Congress also recognised the importance of getting the long-term economic relationship right and downplayed the potential of any major agreement on the contentious currency issues coming from the Strategic Economic Dialogue.

However, he called Friday's decision by the People's Bank of China to allow the yuan to fluctuate in a daily range of 0.5 per cent above and below its central parity rate a positive step.

'The Treasury's view is that this is a useful step towards greater flexibility and an eventual float of the currency ... It's important now that Chinese authorities use the wider band and allow greater movement within each day and over time,' Mr Holmer said.

When asked what the expected tangible results from the dialogue are, Mr Holmer said that there may be some agreement on the relaxation on foreign ownership restrictions of Chinese security firms, new commercial airline flights between the two countries and American technology to promote energy efficiency and control pollution in China.

He also acknowledged how difficult the negotiations for the dialogue meeting had been.

'None of us said this was going to be easy,' he said.